What’s HTC paying Apple for patents? Not an “outrageous” $8 per phone

It's a "very, very happy settlement," says HTC CEO Peter Chou.

When Apple settled all of its worldwide patent battles against HTC last week, it was clear from the get-go that the public was never going to find out the terms of the agreement. Of course, a sealed agreement doesn't stop speculators and pundits from doing their thing.

"HTC is expected to give Apple a net licensing fee of as much as $8 per phone, and may also serve as a blueprint for future deals with Samsung and Motorola," wrote Neil Hughes at AppleInsider. He cited analysts who spoke with "industry sources" who said the Apple-HTC deal will result in a net licensing fee of between $6 and $8. That's compared to press reports that HTC is paying Microsoft $5 per phone.

Yesterday, HTC CEO Peter Chou tried to lay that to rest. "I think that these estimates are baseless and very, very wrong," said Chou, according to a Reuters report out of Tokyo. "It is an outrageous number, but I'm not going to comment anything on a specific number. I believe we have a very, very happy settlement and a good ending."

Not long ago, HTC was a high-flying smartphone company, but today it has dramatically lost market share, especially to Samsung. The suggestion of a high payout to Apple comes at a time when HTC is also dealing with rumors of boardroom tension between Chou and the company's chairwoman. The company denies those allegations, which were reported in Next Magazine, a Taiwanese publication.

65 Reader Comments

$8 per phone? $5 per for MS? Where are they getting these numbers? Also didn't Apple claim in the Samsung case that single patents should be going for $20-$40 each or something exorbitant like that? Well I guess that would explain why Samsung wants to know the details of the HTC settlement.

Well I guess that would explain why Samsung wants to know the details of the HTC settlement.

They claim they want to know the details because Apple were suing HTC for some patent(s) which Apple had told Samsung were completely off the table. Their argument is that if they made a deal with HTC on the patent(s) in question, Apple should now be satisfied with monetary damages from the Galaxy infringement, rather than completely removing the devices from the market.

But really, they just want to get a look at the agreement, just as a dozen other companies would like to be privy to the details. If their concern was really that Apple gave HTC a license on a patent it told Samsung was out of bounds, they could just ask Judge Koh to look at the agreement herself to see if it was relevant.

The fact is, it's not relevant anyway, as Apple aren't required to offer Samsung and HTC the same terms, or any terms at all; these aren't FRAND patents.

Really, HTC was acknowledged in court to have patents which would cause apple to back down - and in some theory people imagine that = HTC giving apple money?

hint: no.Samsung wants to know about the settlement because Apple said "we won't license these patents, and require an injunction from Samsung being able to sell devices". Yet, if apple licensed them to HTC as is extremely likely (since it seems to be basically a ceasefire), then apple's injunctions against Samsung = void = apple is going to owe samsung a lot of money.

Apple indeed wants a ton of money for their patents, while simultaneously paying nothing for everyone else's. It's why they and microsoft alike are pushing to try to invalidate FRAND patents.

Really, HTC was acknowledged in court to have patents which would cause apple to back down - and in some theory people imagine that = HTC giving apple money?

hint: no.Samsung wants to know about the settlement because Apple said "we won't license these patents, and require an injunction from Samsung being able to sell devices". Yet, if apple licensed them to HTC as is extremely likely (since it seems to be basically a ceasefire), then apple's injunctions against Samsung = void = apple is going to owe samsung a lot of money.

Apple indeed wants a ton of money for their patents, while simultaneously paying nothing for everyone else's. It's why they and microsoft alike are pushing to try to invalidate FRAND patents.

A good assessment IMO. Based on the language of HTC's press release, and Apple's financial clout (giving me reason to believe they dictated the terms of this agreement), we can reasonably conclude that Apple would lose out if the agreement were made public. In other words, this looks like a clear victory for HTC.

I'd still most like to know if this involves Windows Phone in anyway, considering the previous deal between Apple and Microsoft plus HTC's new WP push.

HTC in six months: "We've decided to stop making Android phones so we can refocus our efforts on the future of mobile computing, Windows Phone, and here to tell you all about it are our new owners, Microsoft!"

OK but what other restrictions are in the agreement? Such as the one where MS can't copy the iPhone perhaps?

designerfx wrote:

HTC is paying $0 for phone, and anyone who thinks otherwise is crazy.

Really, HTC was acknowledged in court to have patents which would cause apple to back down - and in some theory people imagine that = HTC giving apple money?

hint: no.Samsung wants to know about the settlement because Apple said "we won't license these patents, and require an injunction from Samsung being able to sell devices". Yet, if apple licensed them to HTC as is extremely likely (since it seems to be basically a ceasefire), then apple's injunctions against Samsung = void = apple is going to owe samsung a lot of money.

Apple indeed wants a ton of money for their patents, while simultaneously paying nothing for everyone else's. It's why they and microsoft alike are pushing to try to invalidate FRAND patents.

Apple indeed wants a ton of money for their patents, while simultaneously paying nothing for everyone else's. It's why they and microsoft alike are pushing to try to invalidate FRAND patents.

I think you are misreading what Apple and Microsoft are trying to do with regards to FRAND patents. Their primary goal is to ensure that the FRAND agreements are honored. Invalidating patents is really secondary, and provides little benefit. What they want to do is a) ensure that SEP patents cannot be used as a basis for ITC embargoes, and b) that the "reasonable and non-discriminatory" terms are actually followed (no "you can sell it to anybody but Apple/Microsoft" terms in contracts as Google has tried).

They are probably also trying to extend first sale doctrine as well, which will be a tremendous benefit to all consumers.

$8 per phone? $5 per for MS? Where are they getting these numbers? Also didn't Apple claim in the Samsung case that single patents should be going for $20-$40 each or something exorbitant like that? Well I guess that would explain why Samsung wants to know the details of the HTC settlement.

I wish HTC would regain some marketshare over Samsung, the experience and the build quality is always so much better. I've only used HTC phones up till I got this Galaxy Nexus, and that is only because my HD2 finally died and I didn't want to go back into a contract. I would have bought an HTC One X international if the bands worked on t-mobile. Alas... I wish HTC would make another Nexus phone, the Nexus One was such a good phone and I loved the G1 when it came out.

As for this talk about how much HTC is paying for patents, I wish they would have never settled on the 5$ per phone to Microsoft, and there is no way they can be paying more than that to Apple considering the patents they're accused of infringing on are less severe than the accused patents by Microsoft.

I find the slow-motion train wreck that is HTC very distressing. My first smartphone was an HTC device, and while flawed, it had many features that I loved. Most notably, HTC has always been one of the only Android OEM's that seems to care about materials and build quality in their devices.

My wife bought a HTC One V for less than $200 outright, and it has a great LCD screen with a 252 pixel density and aluminum casing. It feels lightyears ahead of similarly priced devices from LG, Samsung, etc. Unfortunately, it's also slow and buggy. There's such great potential there, but they released too many mediocre devices (HTC Thunderbolt, anyone?) and shot themselves in the foot.

I wish HTC would regain some marketshare over Samsung, the experience and the build quality is always so much better. I've only used HTC phones up till I got this Galaxy Nexus, and that is only because my HD2 finally died and I didn't want to go back into a contract. I would have bought an HTC One X international if the bands worked on t-mobile. Alas... I wish HTC would make another Nexus phone, the Nexus One was such a good phone and I loved the G1 when it came out.

As for this talk about how much HTC is paying for patents, I wish they would have never settled on the 5$ per phone to Microsoft, and there is no way they can be paying more than that to Apple considering the patents they're accused of infringing on are less severe than the accused patents by Microsoft.

Agreed. I chose the HTC EVO 4G LTE and my wife chose the Samsung Galaxu SIII. I have to say, I think my EVO is a much better phone. Definitely happy I chose it over the SIII.

The fact is, it's not relevant anyway, as Apple aren't required to offer Samsung and HTC the same terms, or any terms at all; these aren't FRAND patents.

It's relevant because in the trial Apple was claiming irreparable damage from Samsung for infringing these patents, which is why they were seeking such ridiculous damages. If they licensed these same patents to HTC for cheap, then it didn't really cause irreparable damages.

"I think that these estimates are baseless and very, very wrong," said Chou...

"I think"?!? Yeah... sure.

For those of you who doubt that HTC is now paying Apple royalties... consider this: the carefully chosen phrasing used by Chou might be surprisingly revealing. I would suggest that his phrasing indicates that either Chou is entirely ignorant of the details surrounding the deal that was struck (and was chosen by HP to answer questions specifically for that reason) or he is lying through his proverbial teeth. Given that he is the CEO, I would lean towards the latter... but it's not entirely irrational for certain top level executives to be left out of the details of certain matters. (Plausible deny-ability?)

It's relevant because in the trial Apple was claiming irreparable damage from Samsung for infringing these patents, which is why they were seeking such ridiculous damages. If they licensed these same patents to HTC for cheap, then it didn't really cause irreparable damages.

The damages are irreparable because they had no intention of licensing that stuff to Samsung, and Samsung knew that, but used the IP anyway.

Again, these aren't FRAND patents, and Apple shouldn't be forced in to a licensing deal of any kind, but that's exactly what would occur if Samsung were allowed to willfully violate Apple's patents, and then pay only a nominal fee for doing so.

It's relevant because in the trial Apple was claiming irreparable damage from Samsung for infringing these patents, which is why they were seeking such ridiculous damages. If they licensed these same patents to HTC for cheap, then it didn't really cause irreparable damages.

The damages are irreparable because they had no intention of licensing that stuff to Samsung, and Samsung knew that, but used the IP anyway.

Again, these aren't FRAND patents, and Apple shouldn't be forced in to a licensing deal of any kind, but that's exactly what would occur if Samsung were allowed to willfully violate Apple's patents, and then pay only a nominal fee for doing so.

Being FRAND or not is * IRRELEVANT*. I'm only talking to Apple's claim that infringement of these patents caused irreparable harm, which is *FALSE* if they licensed the patents for cheap to HTC. That's the definition of irreparable harm... Harm that cannot be corrected with monetary compensation... Which is exactly what they are doing by licensing to HTC. So the fact that the patents are not FRAND is irrelevant, as it's licensing directly affects their claims of irreparable harm.

Then you're arguing that a company can never enter an exclusive licensing agreement with another company, because once they do that, anyone can just come along and violate the patent, and at worst, they'll just have to pay "market price" for the license.

Okay... I have this strong feeling that my previous post isn't going to be very popular in this particular forum, so let me supplement it a bit, with something that might sound more plausible to the mostly-Apple-antagonistic Ars audience:

It is actually plausible that HTC is a pawn in this whole thing, and that the "patent cross licensing deal" between HTC and Apple is (very nearly) currency neutral -- that is, little or no exchange of money between the two companies... and here is how that would look to me.

Apple and HTC could have agreed to set levels of compensation for their respective patents in such a fashion, that each company is ultimately paying the other company (on paper, at least) roughly the same amounts. (Personally, I suspect that Apple ultimately had the upper hand in this lawsuit, and as such, I very much doubt that Apple would have allowed HTC to walk away without leaving something on the table for Apple... but that's not critical to my point.) They do all of this in a non-public contract agreement, as is customary for large corporations.

Then, Samsung comes in to court, and demands access to that contract... Apple's lawyers would be utter fools if they hadn't seen that one coming. So if we assume that they did see that coming, then it seems reasonable that they would have actually penned two separate contracts with HTC: one which addressed licensing of Apple's patents, and one which addressed licensing of HTC's patents, both with exorbitant fees being paid. Well, the agreement specific to HTC's patents would be entirely inapplicable to the Apple/Samsung litigation, right? Samsung possesses a different set of patents. So if the judge agrees to Samsung's demands, then logically, Apple could only be compelled to show the licensing agreement which relates to Apple's own patents... which, if also applied to Samsung, would eat Samsung's lunch.

In other words: IMHO, if Apple's lawyers played their "pawn" in the fashion that I've described above... then Samsung may be royally shooting themselves in the foot by demanding access to that contract.

Learn to read. I never claimed LTE wasn't a standard, just that it wasn't covered by FRAND licensing. Just because a technology is a standard doesn't mean all your patents covering such technology immediately fall under FRAND. Put it another way, if HTC LTE patents were covered under FRAND, then why on earth did Apple try to invalidate them (and lost), then eventually settle with a cross licensing agreement that the HTC CEO is "very, very happy" with?

Also didn't Apple claim in the Samsung case that single patents should be going for $20-$40 each or something exorbitant like that?

Those numbers are constantly quoted out of context, it was part of a heated argument where both sides were practically at each other's throats with anger and were throwing huge numbers around.

Nobody (except maybe Google/Motorola) actually expects anybody to pay figures in that range, lets please stop bringing them into the discussion? We are trying to have a serious discussion about the contents of a *real* patent licensing agreement.

A good assessment IMO. Based on the language of HTC's press release, and Apple's financial clout (giving me reason to believe they dictated the terms of this agreement), we can reasonably conclude that Apple would lose out if the agreement were made public. In other words, this looks like a clear victory for HTC.

What do you mean by "victory"?

Presumably Apple is also very happy with the deal, for reasons you pointed out. A victory implies one winner and one loser. As long as nobody is trying to undercut them with clones, Apple is happy and would consider themselves victorious.

Apple makes up at least 70%* of global profit in phone sales. HTC is around 1%* (making them the third largest in the world; pretty impressive for what looks like a small number). Clearly HTC is incapable of paying any amount of money that Apple would care about. Even if they handed over 100% of their profit it would still barely be worth all the bad PR and stock market issues any court case brings with it (especially if the jury rules against you, which is always a possibility).

Apple doesn't give a shit about patent royalties from HTC.

Far more likely both parties agreed not to make certain business decisions and there's a pretty good chance they never intended to make those business decisions anyway. That's also the kind of deal Samsung's executives have kept off the table.

Learn to read. I never claimed LTE wasn't a standard, just that it wasn't covered by FRAND licensing. Just because a technology is a standard doesn't mean all your patents covering such technology immediately fall under FRAND.

Do you *work* with 3GPP? Our group *DOES*. A standards body does not define or refer to a standard without defining the IP policy. And most all standards bodies I work with will *NEVER* refer to a standard or technology that employs worse than FRAND. How each standards body organizes and does licensing is completely up to the standards body.

All Individual Members of 3GPP abide by the IPR policies of the OP to which they belong; all such policies are broadly similar see also "What is the 3GPP IPR Policy", and require IPR holders to make licences available to all third parties, whether or not they are 3GPP Individual Members, under fair, reasonable and non-discriminatory (FRAND) terms.

The fact is, it's not relevant anyway, as Apple aren't required to offer Samsung and HTC the same terms, or any terms at all; these aren't FRAND patents.

Samsung and possibly the courts would likely choose to disagree. Given the rational that A has implied that they will not license patents 1,2,3 because they are priceless, and had the courts impose penalties based upon "priceless". If A then goes ahead and licences them to another company, they are no longer "priceless" but have a identifed price. As such S like H should then be able to licence patents 1,2,3 from A, regardless of if the price is suitable or not.In addition IF A did licence the "priceless" patents, I am quite sure that the courts would draw exception with A for manipulating the courts in such a way. That is a big, and unsubstantiated IF, without seeing the terms of the licencing.